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It feels shady but is it any different than warren buffet buying convertible preferreds in Goldman and then issuing a statement that he invested in Goldman? So many shorts got burned by that. I am not a lawyer but if esl compelled sears to buy back the debt, that might be a problem; but if...

are you saying those two are the same guy? I just made that connection a few min ago.

No. It’s completely different. Taking your idea to a further extreme example: warren buffet could not ever buy a stock because after it becomes public that he owns a stock, the stock rallies and he profits. Further, its not irrational for a company to buy back its cheapest debt. After all that...

Fair point. But how do you know it’s supply and demand vs a real fundamental issue? If you trade it systematically then the supply/demand return will be low as you will be forced to trade a lot of “pushes.”

Let me ask you this: why would there be misprocings in earnings that would be significant? And why would you be able to identify them over a market maker who has every conceivable dataset out there? I’m not saying that there aren’t opportunities. There are. But not as many as you are making out...

There are two ways to trade earnings (the way I see it): Statistically or idiosyncratically (if that's a real word) Statistically will have low returns because you will have to buy/sell many earnings and you will only be looking to earn a few vols over the whole portfolio. But for that 1 month...

I think it will be very capital intensive and returns will be mediocre (by retail standards).

Was that not obvious? TrueType was one of his multinicks

David good boy was a troll. Just because he used his real name doesn’t make him not a troll. Truetype is contructive to this forum. Thanks for changing.

Totally different examples. What esl did when it financed sears was legal (separate from the cds part). Blowing up plants is illegal regardless of the motivation. A more apt comparison is citron research who goes on twitter raids (which are legal) after shorting the stock.

Buy Apple vol and sell djx vol. you could do it as a calendar or two straddles.

It's actually very difficult to start a hedgefund. A fund needs AUM to live and without enough AUM they can't maintain their expenses. That's why most funds fail. Some blow up and some meager returns, but in the end it's really about AUM. If you can't raise it, you die.

Yes. For example the expected 3month implied vol 3 months from now

I would tend to agree that volatility strategies are capital inefficient. It used to be that there was a lot of edge in typical vol strategies but most of it went away when market access improved and computation costs came down.

Vix has significant carry costs.

A common trade is SPX volatility vs SX5E volatility. You would delta hedge to isolate the vol risk. Other times I have done spread trades where I don't delta hedge the position. At the end of the day, there are two reasons to "spread:" 1. To trade the relative value of two assets 2. To isolate...

Lots of experienced traders fail too.

Sure. I’ve traded a lot of that. Pretty much all vol traders do.

What do you mean by spread trading?

There are lots of people who trade derivatives for other reasons. Derivatives trading is about harvesting these pennies that other leave on the floor.